Part Payment Through Bank Does the Trick: ITAT Deletes Section 56(2)(vii) Addition Despite 7-Year Gap in Registration

Arvind Apte Vs ITO (ITAT Mumbai)

Part Payment Through Bank Does the Trick: ITAT Deletes Section 56(2)(vii) Addition Despite 7-Year Gap in Registration

2011 Agreement Saves Buyer from Section 56(2)(vii): ITAT Deletes Addition Based on 2018 Stamp Duty Value

The Mumbai ITAT deleted an addition of ₹22.38 lakh made under Section 56(2)(vii), holding that where substantial payments towards purchase of immovable property were made through banking channels pursuant to an earlier agreement, the assessee was entitled to the benefit of the first and second provisos to Section 56(2)(vii) and the stamp duty value as on the agreement date had to be considered.

The assessee had entered into an agreement to sell on 29.01.2011 for purchase of a property jointly with a family member. Although the sale deed was ultimately registered on 23.02.2018 for a consideration of ₹1 crore, the Stamp Valuation Authority valued the property at about ₹1.44 crore on the date of registration. Based on the difference, the Assessing Officer made an addition of ₹22.38 lakh in the hands of the assessee under Section 56(2)(vii).

Before the Tribunal, the assessee demonstrated that substantial payments had been made through banking channels in 2011, 2012, 2013, 2014 and subsequent years pursuant to the original agreement. It was also pointed out that the stamp duty valuation on the date of the agreement in 2011 was only about ₹58.25 lakh, which was significantly lower than the agreed purchase consideration of ₹1 crore.

The ITAT observed that both the Assessing Officer and the CIT(A) had focused only on the initial cash payment of ₹5,000 and ignored the substantial payments subsequently made through account-payee instruments. Once part consideration had been paid through banking channels in pursuance of the agreement, the assessee became eligible for the protection provided under the provisos to Section 56(2)(vii).

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. This appeal by assessee is directed against the order of learned Commissioner (Appeals) dated 30 July 2025 for assessment year (AY) 2018- 19. Though, the assessee has raised multiple grounds of appeal, however, in our considered view, the substantial grounds of appeal relate to upholding addition under section 56(2)(vii) of Rs. 22,37,967/-.

2. Rival submissions of both the parties have been heard on record perused. The Learned authorised representative (ld.AR) of the assessee submits that during the relevant financial year the assessee purchased immovable property along with his family members. Initially, the assessee and his co-owner made agreement to sale on 29^th January 2011, fixing the sale consideration. However, the transaction of registration of property was completed on 23^rd February 2018. At the time of entering into agreement to sale, the assessee made part payment of sale consideration through banking channel in November 2011 of ₹ 2,50,000/-, ₹ 3.00 lakhs in December 2011, Rs.1.00 lakh was paid in April 2013, Rs.50,000 in March 2014, and certain payments in 2015, as well as in 2016 and 2017. Since part payment of consideration was paid at the time of entering into agreement other than cash payment and by way of banking channel, therefore, the assessee is eligible for the benefit of First & Second Proviso to section 56(2)(vii) of the Act. The lower authorities denied such benefit despite bringing all such fact in their notice. The assessee has placed on record the copy of agreement acknowledging such part payment. The assessee also placed on record the bank statements reflecting various payments made to the seller through banking channel. The learned AR of the assessee further submitted that no addition was made in case of co-owner despite the fact that both are similar situated, so far as facts are concerned. Thus, the revenue cannot give different treatment in the hand of one corner and the other. Thus, the assessee is also liable to be succeeded on this ground alone. To support his submission, the learned AR of the assessee relied upon the following decisions;

> Radha Kishan Kungwani Vs ITO in ITA No. 1106/JP/2018,

> ACIT Vs Subhodh Mennon in ITA No. 676/Mum/2015,

> Sajjanraj Mehta Vs ITO in ITA No. 56/Mum/2021,

> Sanjay Kumar Ramanbhai Patel Vs ITO in ITA no. 374 /Srt/2018.

3. On the other hand, the learned senior departmental representative (ld Sr DR) for the revenue supported the order of lower authorities. The assessing officer in the assessment order recorded that assessee has paid only ₹ 5,000/-, that too in cash, at the time of agreement. No other payment, allegedly paid by the assessee to seller is recorded by assessing officer.

4. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld AR of the assessee. We find that assessing officer while passing the assessment order recorded that assessee purchased certain immovable property at survey No. 12/5 & 12/8, at Sirgaon, Badlapur, Taluka-Ambernath Maharashtra. The purchase consideration as per sale date is ₹ 1.00 crore, however, the stamp valuation authority (SVA) valued of the said property at ₹ 1.44 crore at the time of registration of transaction. On show cause notice, the assessee filed his reply and claimed benefit of First and Second Proviso to section 56(2) (vii). The assessing officer has not recorded the actual contents of reply and evidences furnished by assessee. The assessing officer simply recorded that at the time of execution of agreement of sale on 29^thJanuary 2011, the assessee paid Rs. 5,000/- in cash. It was also recorded that assessee purchased immovable property jointly with Praveen Arvind Apte on 23^rdFebruary 2018 for a consideration of ₹ 1.00 crore, which is less than the value determined by Stamp Valuation Authority at ₹ 1.44 crore. The assessee is having share of 50.10%, accordingly addition of Rs. 22,37,967/- was made in the assessment order dated 25^thMarch 2021. We find that before learned Commissioner (Appeals) the assessee reiterated his submission that substantial part payment of consideration was paid either at the time of execution of agreement or during the period much prior to execution of final sale deed. The assessee also stated that as per the Stamp Duty Valuation Authority, the value of property at the time of execution of agreement of sale was only of ₹ 58,24,800/-. The assessee agreed to purchase such property at the rate of ₹ 1.00 crore which was more than the value of Stamp Valuation Authority prevailing at that time. The learned Commissioner (Appeals) despite recording all such submission and the details of various payments made through banking channel, confirmed the action of assessing officer by holding that payment of ₹ 5,000/-was made other than by way of account pay cheque at the time of entering into agreement on 29^th January 2011. We find that landed Commissioner (Appeals) ignored that substantial payment was made by assessee either in 2011, 2012 or in 2013 & 2014 in pursuance of agreement. We find that assessee has placed on record bank statement reflecting payments made in November 2011 as well as December 2011 at ₹ 2,50,000/- and Rs.3,00,000/-respectively. The assessee has also shown payments made through account pay cheque in 2012, 2013 and 2015. Thus, in view of aforesaid factual discussion we find that when the assessee paid substantial part payment in pursuance of agreement by way of banking channel, hence the assessee is eligible to the benefit of First & Second Proviso to section 56(2)(vii) of the Act. In the result, the substantial ground of appeal raised by the assessee is allowed.

5. In the result of appeal of the assessee is allowed

Order was pronounced on 09/06/2026.